internal revenue service, treasury §1.6045–1 · internal revenue service, treasury §1.6045–1...

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Internal Revenue Service, Treasury § 1.6045–1

statement required by this section must be furnished on or before January 31 of the following year, but no state-ment may be furnished before the final payment has been made for the cal-endar year. For a statement required to be furnished after December 31, 2008, the February 15 due date under section 6045 applies to the statement if the statement is furnished in a consoli-dated reporting statement under sec-tion 6045. See §§ 1.6045–1(k)(3), 1.6045– 2(d)(2), 1.6045–3(e)(2), 1.6045–4(m)(3), and 1.6045–5(a)(3)(ii).

(c) Cross-reference to penalty. For pro-visions relating to the penalty provided for failure to furnish timely a correct payee statement required under section 6044(e), see § 301.6722–1 of this chapter (Procedure and Administration Regula-tions). See § 301.6724–1 of this chapter for the waiver of a penalty if the fail-ure is due to reasonable cause and is not due to willful neglect.

(d) Effective date. This section is ef-fective for payee statements due after December 31, 1995, without regard to extensions. For the substantially simi-lar statement mailing requirements that apply with respect to forms re-quired to be filed after October 22, 1986, and before January 1, 1996, see Rev. Proc. 84–70 (1984–2 C.B. 716) (or suc-cessor revenue procedures). See § 601.601(d)(2) of this chapter.

[T.D. 8637, 60 FR 66111, Dec. 21, 1995, as amended by T.D. 8734, 62 FR 53476, Oct. 14, 1997; T.D. 9504, 75 FR 64090, Oct. 18, 2010]

§ 1.6045–1 Returns of information of brokers and barter exchanges.

(a) Definitions. The following defini-tions apply for purposes of this section and § 1.6045–2:

(1) The term broker means any person (other than a person who is required to report a transaction under section 6043), U.S. or foreign, that, in the ordi-nary course of a trade or business dur-ing the calendar year, stands ready to effect sales to be made by others. A broker includes an obligor that regu-larly issues and retires its own debt ob-ligations or a corporation that regu-larly redeems its own stock. However, with respect to a sale (including a re-demption or retirement) effected at an office outside the United States, a broker includes only a person described

as a U.S. payor or U.S. middleman in § 1.6049–5(c)(5). In addition, a broker does not include an international orga-nization described in § 1.6049– 4(c)(1)(ii)(G) that redeems or retires an obligation of which it is the issuer.

(2) The term customer means, with re-spect to a sale effected by a broker, the person (other than such broker) that makes the sale, if the broker acts as:

(i) An agent for such person in the sale;

(ii) A principal in the sale; or (iii) The participant in the sale re-

sponsible for paying to such person or crediting to such person’s account the gross proceeds on the sale.

(3) The term security means: (i) A share of stock in a corporation

(foreign or domestic); (ii) An interest in a trust; (iii) An interest in a partnership; (iv) A debt obligation; (v) An interest in or right to pur-

chase any of the foregoing in connec-tion with the issuance thereof from the issuer or an agent of the issuer or from an underwriter that purchases any of the foregoing from the issuer, or

(vi) An interest in a security de-scribed in paragraph (a)(3) (i) or (iv) (but not including options or executory contracts that require delivery of such type of security).

(4) The term barter exchange means any person with members or clients that contract either with each other or with such person to trade or barter property or services either directly or through such person. The term does not include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis.

(5) The term commodity means: (i) Any type of personal property or

an interest therein (other than securi-ties as defined in paragraph (a)(3)) the trading of regulated futures contracts in which has been approved by the Commodity Futures Trading Commis-sion;

(ii) Lead, palm oil, rapeseed, tea, tin, or an interest in any of the foregoing; or

(iii) Any other personal property or an interest therein that is of a type the Secretary determines is to be treated as a ‘‘commodity’’ under this section,

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from and after the date specified in a notice of such determination published in the FEDERAL REGISTER.

(6) The term regulated futures contract means a regulated futures contract within the meaning of section 1256(b).

(7) The term forward contract means: (i) An executory contract that re-

quires delivery of a commodity in ex-change for cash and which contract is not a regulated futures contract; or

(ii) An executory contract that re-quires delivery of personal property or an interest therein in exchange for cash, or a cash settlement contract, if such executory contract or cash settle-ment contract is of a type the Sec-retary determines is to be treated as a ‘‘forward contract’’ under this section, from and after the date specified in a notice of such determination published in the FEDERAL REGISTER.

(8) The term closing transaction means any termination of an obligation under a forward contract or a regulated fu-tures contract.

(9) The term sale means any disposi-tion of securities, commodities, regu-lated futures contracts, or forward con-tracts, and includes redemptions of stock, retirements of indebtedness, and enterings into short sales, but only to the extent any of these actions are con-ducted for cash. In the case of a regu-lated futures contract or a forward contract, a sale is any closing trans-action. When a closing transaction in a regulated futures contract involves making or taking delivery, the profit or loss on the contract is a sale and the delivery is a separate sale. When a clos-ing transaction in a forward contract involves making or taking delivery, the delivery is a sale without sepa-rating the profit or loss on the con-tract from the profit or loss on the de-livery, except that taking delivery for United States dollars is not a sale. Grants or purchases of options, exer-cises of call options, and enterings into contracts that require delivery of per-sonal property or an interest therein are not sales. For purposes of this sec-tion only, a constructive sale under section 1259 and a mark to fair market value under sections 475 or 1296 are not sales.

(10) The term effect means, with re-spect to a sale, to act as:

(i) An agent for a party in the sale wherein the nature of the agency is such that the agent ordinarily would know the gross proceeds from the sale; or

(ii) A principal in such sale.

Acting as an agent or principal with re-spect to grants or purchases of options, exercises of call options, or enterings into contracts that require delivery of personal property or an interest there-in is not of itself effecting a sale. A broker that has on its books a forward contract under which delivery is made effects such delivery.

(11) The term foreign currency means currency of a foreign country.

(12) The term cash means United States dollars or any convertible for-eign currency.

(13) The term person includes any governmental unit and any agency or instrumentality thereof.

(14) The term specified security means any share of stock (or any interest treated as stock, including, for exam-ple, an American Depositary Receipt) in an entity organized as, or treated for Federal tax purposes as, a corporation (foreign or domestic). Solely for pur-poses of this paragraph (a)(14), a secu-rity classified as stock by the issuer is treated as stock. If the issuer has not classified the security, the security is not treated as stock unless the broker knows that the security is reasonably classified as stock under general Fed-eral tax principles.

(15) The term covered security means a specified security described in this paragraph (a)(15).

(i) In general. Except as provided in paragraph (a)(15)(iv) of this section, the following securities are covered securi-ties:

(A) A specified security acquired for cash in an account on or after January 1, 2011, except stock for which the aver-age basis method is available under § 1.1012–1(e).

(B) Stock for which the average basis method is available under § 1.1012–1(e) acquired for cash in an account on or after January 1, 2012.

(C) A specified security transferred to an account if the broker or other cus-todian of the account receives a trans-fer statement (as described in § 1.6045A–


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1) reporting the security as a covered security.

(ii) Acquired in an account. For pur-poses of this paragraph (a)(15), a secu-rity is considered acquired in a cus-tomer’s account at a broker or custo-dian if the security is acquired by the customer’s broker or custodian or ac-quired by another broker and delivered to the customer’s broker or custodian.

(iii) Corporate actions and other events. For purposes of this paragraph (a)(15), a security acquired due to a stock divi-dend, stock split, reorganization, re-demption, stock conversion, recapital-ization, corporate division, or other similar action is considered acquired for cash in an account.

(iv) Exceptions. Notwithstanding paragraph (a)(15)(i) of this section, the following securities are not covered se-curities:

(A) Stock acquired in 2011 that is transferred to a dividend reinvestment plan (as described in § 1.1012–1(e)(6)) in 2011. However, a covered security ac-quired in 2011 that is transferred to a dividend reinvestment plan after 2011 remains a covered security.

(B) A security acquired through an event described in paragraph (a)(15)(iii) of this section if the basis of the ac-quired security is determined from the basis of a noncovered security.

(C) A security that is excepted at the time of its acquisition from reporting under paragraph (c)(3) or (g) of this sec-tion. However, a broker cannot treat a security as acquired by an exempt for-eign person under paragraph (g)(1)(i) of this section at the time of acquisition if, at that time, the broker knows or should have known (including by rea-son of information that the broker is required to collect under section 1471 or 1472) that the customer is not a for-eign person.

(D) A security for which reporting under this section is required by § 1.6049–5(d)(3)(ii) (certain securities owned by a foreign intermediary or flow-through entity).

(16) The term noncovered security means any security that is not a cov-ered security.

(b) Examples. The following examples illustrate the definitions in paragraph (a):

Example 1. The following persons generally are brokers within the meaning of paragraph (a)(1):

(i) A mutual fund, an underwriter of the mutual fund, or an agent for the mutual fund, any of which stands ready to redeem or repurchase shares in such mutual fund.

(ii) A professional custodian (such as a bank) that regularly arranges sales for cus-todial accounts pursuant to instructions from the owner of the property.

(iii) A depositary trust or other person who regularly acts as an escrow agent in cor-porate acquisitions, if the nature of the ac-tivities of the agent is such that the agent ordinarily would know the gross proceeds from sales.

(iv) A stock transfer agent for a corpora-tion, which agent records transfers of stock in such corporation, if the nature of the ac-tivities of the agent is such that the agent ordinarily would know the gross proceeds from sales.

(v) A dividend reinvestment agent for a corporation that stands ready to purchase or redeem shares.

Example 2. The following persons are not brokers within the meaning of paragraph (1)(a) in the absence of additional facts that indicate the person is a broker:

(i) A stock transfer agent for a corpora-tion, which agent daily records transfers of stock in such corporation, if the nature of the activities of the agent is such that the agent ordinarily would not know the gross proceeds from sales.

(ii) A person (such as a stock exchange) that merely provides facilities in which oth-ers effect sales.

(iii) An escrow agent or nominee if such agency is not in the ordinary course of a trade or business.

(iv) An escrow agent, otherwise a broker, which agent effects no sales other than such transactions as are incidental to the purpose of the escrow (such as sales to collect on col-lateral).

(v) A floor broker on a commodities ex-change, which broker maintains no records with respect to the terms of sales.

(vi) A corporation that issues and retires long-term debt on an irregular basis.

(vii) A clearing organization. Example 3. A, B, and C belong to a carpool

in which they commute to and from work. Every third day, each member of the carpool provides transportation for the other two members. Because the carpool arrangement provides solely for the informal exchange of similar services on a noncommercial basis, the carpool is not a barter exchange within the meaning of paragraph (a)(4).

Example 4. X is an organization whose members include retail merchants, wholesale


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merchants, and persons in the trade or busi-ness of performing services. X’s members ex-change property and services among them-selves using credits on the books of X as a medium of exchange. Each exchange through X is reflected on the books of X by crediting the account of the member providing prop-erty or services and debiting the account of the member receiving such property or serv-ices. X also provides information to its mem-bers concerning property and services avail-able for exchange through X. X charges its members a commission on each transaction in which credits on its books are used as a medium of exchange. X is a barter exchange within the meaning of paragraph (a)(4) of this section.

Example 5. A warehouse receipt is an inter-est in personal property for purposes of para-graph (a). Consequently, a warehouse receipt for a quantity of lead is a commodity under paragraph (a)(5)(ii). Similarly an executory contract that requires delivery of a ware-house receipt for a quantity of lead is a for-ward contract under paragraph (a)(7)(ii).

Example 6. The only customers of a deposi-tory trust acting as an escrow agent in cor-porate acquisitions which trust is a broker, are shareholders to whom the trust makes payments or shareholders for whom the trust is acting as an agent.

Example 7. The only customers of a stock transfer agent, which agent is a broker are shareholders to whom the agent makes pay-ments or shareholders for whom the agent is acting as an agent,

Example 8. D, an individual not otherwise exempt from reporting, is the holder of an obligation issued by P, a corporation. R, a broker, acting as an agent for P, retires such obligation held by D. Such obligor payments from R represent obligor payments by P. (See paragraph (c)(3)(v)). D, the person to whom the gross proceeds are paid or credited by R, is the customer of R.

Example 9. E, an individual not otherwise exempt from reporting, maintains an ac-count with S, a broker. On June 1, 2012, E in-structs S to purchase stock that is a speci-fied security for cash. S places an order to purchase the stock with T, another broker. E does not maintain an account with T. T exe-cutes the purchase. Custody of the purchased stock is transferred to E’s account at S. Under paragraph (a)(15)(ii) of this section, the stock is considered acquired for cash in E’s account at S. Because the stock is ac-quired on or after January 1, 2012, under paragraph (a)(15)(i) of this section, it is a covered security.

Example 10. F, an individual not otherwise exempt from reporting, is granted 100 shares of stock in F’s employer by F’s employer. Because F does not acquire the stock for cash or through a transfer to an account with a transfer statement (as described in

§ 1.6045A–1), under paragraph (a)(15) of this section, the stock is not a covered security.

Example 11. G, an individual not otherwise exempt from reporting, owns 400 shares of stock in Q, a corporation, in an account with U, a broker. Of the 400 shares, 100 are covered securities and 300 are noncovered securities. Q takes a corporate action to split its stock in a 2-for-1 split. After the stock split, G owns 800 shares of stock. Because the ad-justed basis of 600 of the 800 shares that G owns is determined from the basis of non-covered securities, under paragraphs (a)(15)(iii) and (a)(15)(iv)(B) of this section, these 600 shares are not covered securities and the remaining 200 shares are covered se-curities.

(c) Reporting by brokers—(1) Require-ment of reporting. Any broker shall, ex-cept as otherwise provided, report in the manner prescribed in this section.

(2) Sales required to be reported. Except as provided in paragraphs (c)(3), (c)(5), and (g) of this section, a broker is re-quired to make a return of information for each sale by a customer of the broker if, in the ordinary course of a trade or business in which the broker stands ready to effect sales to be made by others, the broker effects the sale or closes the short position opened by the sale.

(3) Exceptions—(i) Sales effected for ex-empt recipients—

(A) In general. No return of informa-tion is required with respect to a sale effected for a customer that is an ex-empt recipient under paragraph (c)(3)(i)(B) of this section.

(B) Exempt recipient defined. The term exempt recipient means—

(1) A corporation as defined in sec-tion 7701(a)(3), whether domestic or for-eign, except that this exclusion does not apply to sales of covered securities acquired on or after January 1, 2012, by an S corporation as defined in section 1361(a);

(2) An organization exempt from tax-ation under section 501(a) or an indi-vidual retirement plan;

(3) The United States or a State, the District of Columbia, a possession of the United States, a political subdivi-sion of any of the foregoing, a wholly owned agency or instrumentality of any one or more of the foregoing, or a pool or partnership composed exclu-sively of any of the foregoing;

(4) A foreign government, a political subdivision thereof, an international


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organization, or any wholly owned agency or instrumentality of the fore-going;

(5) A foreign central bank of issue as defined in § 1.895–1(b)(1) (i.e., a bank that is by law or government sanction the principal authority, other than the government itself, issuing instruments intended to circulate as currency);

(6) A dealer in securities or commod-ities registered as such under the laws of the United States or a State;

(7) A futures commission merchant registered as such with the Commodity Futures Trading Commission;

(8) A real estate investment trust (as defined in section 856);

(9) An entity registered at all times during the taxable year under the In-vestment Company Act of 1940 (15 U.S.C. 80a–1, et seq.);

(10) A common trust fund (as defined in section 584(a)); or

(11) A financial institution such as a bank, mutual savings bank, savings and loan association, building and loan association, cooperative bank, home-stead association, credit union, indus-trial loan association or bank, or other similar organization.

(C) Exemption certificate—(1) In gen-eral. Except as provided in paragraph (c)(3)(i)(C)(2) of this section, a broker may treat a person described in para-graph (c)(3)(i)(B) of this section as an exempt recipient based on a properly completed exemption certificate (as provided in § 31.3406(h)–3 of this chap-ter); the broker’s actual knowledge that the customer is a person described in paragraph (c)(3)(i)(B) of this section; or the applicable indicators described in § 1.6049–4(c)(1)(ii)(A) through (M). A broker may require an exempt recipi-ent to file a properly completed exemp-tion certificate and may treat an ex-empt recipient that fails to do so as a recipient that is not exempt.

(2) Limitation for corporate customers. For sales of covered securities acquired on or after January 1, 2012, a broker may not treat a customer as an exempt recipient described in paragraph (c)(3)(i)(B)(1) of this section based on the indicators of corporate status de-scribed in § 1.6049–4(c)(1)(ii)(A). How-ever, for sales of all securities, a broker may treat a customer as an exempt re-cipient if one of the following applies:

(i) The name of the customer con-tains the term ‘‘insurance company,’’ ‘‘indemnity company,’’ ‘‘reinsurance company,’’ or ‘‘assurance company.’’

(ii) The name of the customer indi-cates that it is an entity listed as a per se corporation under § 301.7701–2(b)(8)(i) of this chapter.

(iii) The broker receives a properly completed exemption certificate (as provided in § 31.3406(h)–3 of this chap-ter) that asserts that the customer is not an S corporation as defined in sec-tion 1361(a).

(iv) The broker receives a with-holding certificate described in § 1.1441– 1(e)(2)(i) that includes a certification that the person whose name is on the certificate is a foreign corporation.

(ii) Excepted sales. No return of infor-mation is required with respect to a sale effected by a broker for a customer if the sale is an excepted sale. For this purpose, a sale is an excepted sale if it is so designated by the Internal Rev-enue Service in a revenue ruling or rev-enue procedure (see § 601.601(d)(2) of this chapter).

(iii) Multiple brokers. If a broker is in-structed to initiate a sale by a person that is an exempt recipient described in paragraph (c)(3)(i)(B)(6), (7), or (11) of this section, no return of information is required with respect to the sale by that broker. In a redemption of stock or retirement of securities, only the broker responsible for paying the hold-er redeemed or retired, or crediting the gross proceeds on the sale to that hold-er’s account, is required to report the sale.

(iv) Cash on delivery transactions. In the case of a sale of securities through a cash on delivery account, a delivery versus payment account, or other simi-lar account or transaction, only the broker that receives the gross proceeds from the sale against delivery of the securities sold is required to report the sale. If, however, the broker’s customer is another broker (second-party broker) that is an exempt recipient, then only the second-party broker is required to report the sale.

(v) Fiduciaries and partnerships. No re-turn of information is required with re-spect to a sale effected by a custodian or trustee in its capacity as such or a redemption of a partnership interest by


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a partnership, provided the sale is oth-erwise reported by the custodian or trustee on a properly filed Form 1041, or the redemption is otherwise re-ported by the partnership on a properly filed Form 1065, and all Schedule K–1 reporting requirements are satisfied.

(vi) Sales at issue price. No return of information is required with respect to a sale of an interest in a regulated in-vestment company that can hold itself out as a money market fund under Rule 2a–7 under the Investment Com-pany Act of 1940 that computes its cur-rent price per share for purposes of dis-tributions, redemptions, and purchases so as to stabilize the price per share at a constant amount that approximates its issue price or the price at which it was originally sold to the public.

(vii) Obligor payments on certain obli-gations. No return of information is re-quired with respect to payments rep-resenting obligor payments on—

(A) Nontransferable obligations (in-cluding savings bonds, savings ac-counts, checking accounts, and NOW accounts);

(B) Obligations as to which the entire gross proceeds are reported by the broker on Form 1099 under provisions of the Internal Revenue Code other than section 6045 (including stripped coupons issued prior to July 1, 1982); or

(C) Retirement of short-term obliga-tions (i.e., obligations with a fixed ma-turity date not exceeding 1 year from the date of issue) that have original issue discount, as defined in section 1273(a)(1), with or without application of the de minimis rule.

(D) Demand obligations that also are callable by the obligor and that have no premium or discount.

(viii) Foreign currency. No return of information is required with respect to a sale of foreign currency other than a sale pursuant to a forward contract or regulated futures contract that re-quires delivery of foreign currency.

(ix) Fractional share. No return of in-formation is required with respect to a sale of a fractional share of stock if the gross proceeds on the sale of the frac-tional share are less than $20.

(x) Certain retirements. No return of information is required from an issuer or its agent with respect to the retire-ment of book entry or registered form

obligations as to which the relevant books and records indicate that no in-terim transfers have occurred.

(xi) Short sales—(A) In general. A broker may not make a return of infor-mation under this section for a short sale of a security entered into on or after January 1, 2011, until the year a customer delivers a security to satisfy the short sale obligation. The return must be made without regard to the constructive sale rule in section 1259 or to section 1233(h). In general, the broker must report on a single return the information required by paragraph (d)(2)(i) of this section for the short sale except that the broker must report the date the short sale was closed in lieu of the sale date. In applying para-graph (d)(2)(i) of this section, the broker must report the relevant infor-mation regarding the security sold to open the short sale and the adjusted basis of the security delivered to close the short sale and whether any gain or loss on the closing of the short sale is long-term or short-term (within the meaning of section 1222).

(B) Short sale closed by delivery of a noncovered security. A broker is not re-quired to report adjusted basis and whether any gain or loss on the closing of the short sale is long-term or short- term if the short sale is closed by deliv-ery of a noncovered security and the return so indicates. A broker that chooses to report this information is not subject to penalties under section 6721 or 6722 for failure to report this in-formation correctly if the broker indi-cates on the return that the short sale was closed by delivery of a noncovered security.

(C) Short sale obligation transferred to another account. If a short sale obliga-tion is satisfied by delivery of a secu-rity transferred into a customer’s ac-count accompanied by a transfer state-ment (as described in § 1.6045A–1(b)(4)) indicating that the security was bor-rowed, the broker receiving custody of the security may not file a return of information under this section. The re-ceiving broker must furnish a state-ment to the transferor that reports the amount of gross proceeds received from the short sale, the date of the sale, the quantity of shares or units sold, and the Committee on Uniform Security


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Identification Procedures (CUSIP) number of the sold security (if applica-ble) or other security identifier number that the Secretary may designate by publication in the FEDERAL REGISTER or in the Internal Revenue Bulletin (see § 601.601(d)(2) of this chapter). The statement to the transferor also must include the transfer date, the name and contact information of the receiving broker, the name and contact informa-tion of the transferor, and sufficient in-formation to identify the customer. If the customer subsequently closes the short sale obligation in the transferor’s account with non-borrowed securities, the transferor must make the return of information required by this section. In that event, the transferor must take into account the information furnished under this paragraph (c)(3)(xi)(C) on the return unless the transferor knows that the information furnished under this paragraph is incorrect or incom-plete. A failure to report correct infor-mation that arises solely from this re-liance is deemed to be due to reason-able cause for purposes of penalties under sections 6721 and 6722. See § 301.6724–1(a)(1) of this chapter.

(xii) Cross reference. For an exception for certain sales of agricultural com-modities and certificates issued by the Commodity Credit Corporation after January 1, 1993, see paragraph (c)(7) of this section.

(4) Examples. The following examples illustrate the application of the rules in paragraph (c)(3) of this section:

Example 1. P, an individual who is not an exempt recipient, places an order with B, a person generally known in the investment community to be a federally registered broker/dealer, to effect a sale of P’s stock in a publicly traded corporation. B, in turn, places an order to sell the stock with C, a second broker, who will execute the sale. B discloses to C the identity of the customer placing the order. C is not required to make a return of information with respect to the sale because C was instructed by B, an ex-empt recipient as defined in paragraph (c)(3)(i)(B)(6) of this section, to initiate the sale. B is required to make a return of infor-mation with respect to the sale because P is B’s customer and is not an exempt recipient.

Example 2. Assume the same facts as in Ex-ample 1 except that B has an omnibus ac-count with C so that B does not disclose to C whether the transaction is for a customer of B or for B’s own account. C is not required

to make a return of information with respect to the sale because C was instructed by B, an exempt recipient as defined in paragraph (c)(3)(i)(B)(6) of this section, to initiate the sale. B is required to make a return of infor-mation with respect to the sale because P is B’s customer and is not an exempt recipient.

Example 3. D, an individual who is not an exempt recipient, enters into a cash on deliv-ery stock transaction by instructing K, a federally registered broker/dealer, to sell stock owned by D, and to deliver the pro-ceeds to L, a custodian bank. Concurrently with the above instructions, D instructs L to deliver D’s stock to K (or K’s designee) against delivery of the proceeds from K. The records of both K and L with respect to this transaction show an account in the name of D. Pursuant to paragraph (h)(1) of this sec-tion, D is considered the customer of K and L. Under paragraph (c)(3)(iv) of this section, K is not required to make a return of infor-mation with respect to the sale because K will pay the gross proceeds to L against de-livery of the securities sold. L is required to make a return of information with respect to the sale because D is L’s customer and is not an exempt recipient.

Example 4. Assume the same facts as in Ex-ample 3 except that E, a federally registered investment advisor, instructs K to sell stock owned by D and to deliver the proceeds to L. Concurrently with the above instructions, E instructs L to deliver D’s stock to K (or K’s designee) against delivery of the proceeds from K. The records of both K and L with re-spect to the transaction show an account in the name of D. Pursuant to paragraph (h)(1) of this section, D is considered the customer of K and L. Under paragraph (c)(3)(iv) of this section, K is not required to make a return of information with respect to the sale be-cause K will pay the gross proceeds to L against delivery of the securities sold. L is required to make a return of information with respect to the sale because D is L’s cus-tomer and is not an exempt recipient.

Example 5. Assume the same facts as in Ex-ample 4 except that the records of both K and L with respect to the transaction show an account in the name of E. Pursuant to para-graph (h)(1) of this section, E is considered the customer of K and L. Under paragraph (c)(3)(iv) of this section, K is not required to make a return of information with respect to the sale because K will pay the gross pro-ceeds to L against delivery of the securities sold. L is required to make a return of infor-mation with respect to the sale because E is L’s customer and is not an exempt recipient. E is required to make a return of informa-tion with respect to the sale because D is E’s customer and is not an exempt recipient.

Example 6. F, an individual who is not an exempt recipient, owns bonds that are held by G, a federally registered broker/dealer, in


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an account for F with G designated as nomi-nee for F. Upon the retirement of the bonds, the gross proceeds are automatically cred-ited to the account of F. G is required to make a return of information with respect to the retirement because G is the broker re-sponsible for making payments of the gross proceeds to F.

Example 7. On June 24, 2010, H, an indi-vidual who is not an exempt recipient, opens a short sale of stock in an account with M, a broker. Because the short sale is entered into before January 1, 2011, paragraph (c)(3)(xi) of this section does not apply. Under paragraphs (c)(2) and (j) of this sec-tion, M must make a return of information for the year of the sale regardless of when the short sale is closed.

Example 8. (i) On August 25, 2011, H opens a short sale of stock in an account with M, a broker. H closes the short sale with M on January 25, 2012, by purchasing stock of the same corporation in the account in which H opened the short sale and delivering the stock to satisfy H’s short sale obligation. The stock H purchased is a covered security.

(ii) Because the short sale is entered into on or after January 1, 2011, under paragraphs (c)(2) and (c)(3)(xi) of this section, the broker closing the short sale must make a return of information reporting the sale for the year in which the short sale is closed. Thus, M is required to report the sale for 2012. M must report on a single return the relevant infor-mation for the sold stock, the adjusted basis of the purchased stock, and whether any gain or loss on the closing of the short sale is long-term or short-term (within the mean-ing of section 1222). Thus, M must report the information about the short sale opening and closing transactions on a single return for taxable year 2012.

Example 9. (i) Assume the same facts as in Example 8 except that H also has an account with N, a broker, and satisfies the short sale obligation with M by borrowing stock of the same corporation from N and transferring custody of the borrowed stock from N to M. N indicates on the transfer statement that the transferred stock was borrowed in ac-cordance with § 1.6045A–1(b)(4).

(ii) Under paragraph (c)(3)(xi)(C) of this section, M may not file the return of infor-mation required under this section. M must furnish a statement to N that reports the gross proceeds from the short sale on August 25, 2011, the date of the sale, the quantity of shares sold, the CUSIP number or other se-curity identifier number of the sold stock, the transfer date, the name and contact in-formation of M and N, and information iden-tifying H such as H’s name and the account number from which H transferred the bor-rowed stock.

(iii) N must report the gross proceeds from the short sale, the date the short sale was closed, the adjusted basis of the stock ac-

quired to close the short sale, and whether any gain or loss on the closing of the short sale is long-term or short-term (within the meaning of section 1222) on the return of in-formation N is required to file under para-graph (c)(2) of this section when H closes the short sale in the account with N.

(5) Form of reporting for regulated fu-tures contracts—(i) In general. A broker effecting closing transactions in regu-lated futures contracts shall report in-formation with respect to regulated fu-tures contracts solely in the manner prescribed in this paragraph (c)(5). In the case of a sale that involves making delivery pursuant to a regulated fu-tures contract, only the profit or loss on the contract is reported as a trans-action with respect to regulated fu-tures contracts under this paragraph (c)(5); such sales are, however, subject to reporting under paragraph (d)(2). The information required under this paragraph (c)(5) must be reported on a calendar year basis, unless the broker is advised in writing by an account’s owner that the owner’s taxable year is other than a calendar year and the broker elects to report with respect to regulated futures contracts in such ac-count on the basis of the owner’s tax-able year. The following information must be reported as required by Form 1099 with respect to regulated futures contracts held in a customer’s account:

(A) The name, address, and taxpayer identification number of the customer.

(B) The net realized profit or loss from all regulated futures contracts closed during the calendar year.

(C) The net unrealized profit or loss in all open regulated futures contracts at the end of the preceding calendar year.

(D) The net unrealized profit or loss in all open regulated futures contracts at the end of the calendar year.

(E) The aggregate profit or loss from regulated futures contracts ((b)+(d)¥(c)).

(F) Any other information required by Form 1099. See 17 CFR 1.33. For this purpose, the end of a year is the close of business of the last business day of such year. In reporting under this para-graph (c)(5), the broker shall make such adjustments for commissions that have actually been paid and for option premiums as are consistent with the


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books of the broker. No additional re-turns of information with respect to regulated futures contracts so reported are required.

(ii) Determination of profit or loss from foreign currency contracts. A broker ef-fecting a closing transaction in foreign currency contracts (as defined in sec-tion 1256(g)) shall report information with respect to such contracts in the manner prescribed in paragraph (c)(5)(i) of this section. If a foreign cur-rency contract is closed by making or taking delivery, the net realized profit or loss for purposes of paragraph (c)(5)(i)(B) of this section is determined by comparing the contract price to the spot price for the contract currency at the time and place specified in the con-tract. If a foreign currency contract is closed by entry into an offsetting con-tract, the net realized profit or loss for purposes of paragraph (c)(5)(i)(B) of this section is determined by com-paring the contract price to the price of the offsetting contract. The net un-realized profit or loss in a foreign cur-rency contract for purposes of para-graphs (c)(5)(i) (C) and (D) of this sec-tion is determined by comparing the contract price to the broker’s price for similar contracts at the close of busi-ness of the relevant year.

(iii) Examples. The following exam-ples illustrate the application of the rules in this paragraph (c)(5):

Example 1. On October 30, 1984, A, an indi-vidual who is a calendar year taxpayer not otherwise exempt from reporting, buys one March 1985 put on Treasury Bond futures (i.e. A purchases an option to enter into a short regulated futures contract of $100,000 face value U.S. Treasury bonds). A pays $500 for the option. On December 19, 1984, A, through B, exercises the option and enters into the futures contract. On February 15, 1985, A, through B, enters into a closing transaction with respect to the futures contract. These are A’s only transactions in the account. Since B’s books list A’s regulated futures contract on December 31, 1984, B must report for A, for 1984, the unrealized profit or loss in the contract as of December 31, 1984. For 1985, B will report the same amount for A as the unrealized profit or loss at the beginning of 1985. The return of information for 1985 will also include the gain or loss from the contract in the net realized profit or loss from all regulated futures contracts sales during 1985.

Example 2. The facts are the same as in Ex-ample (1) except that A does not enter into

the closing transaction, but instead, on March 20, 1985, B informs A that A will make delivery under the contract. On March 22, 1985, A does so; consequently, A becomes en-titled to the gross proceeds. B enters the closing transaction on its books on March 20, 1985. In addition to the returns of informa-tion required by paragraph (c)(5), as de-scribed in Example (1), B must report the March 22, 1985 delivery as a separate trans-action. B may use as the sale date for the de-livery either March 20, 1985, the date the transaction is entered on the books of B, or March 22, 1985, the date A becomes entitled to the gross proceeds. B may not deduct the $500 premium from the gross proceeds with respect to the March 22, 1985 delivery.

Example 3. The facts are the same as in Ex-ample (2) except that A buys a call on Treas-ury bond futures and takes delivery. B will supply the returns of information required by paragraph (c)(5), as described in Example (1). B is not required to make a return of in-formation with respect to A’s taking deliv-ery.

Example 4. C, an individual who is a cal-endar year taxpayer not otherwise exempt from reporting, has an account with D, a broker. C trades both regulated futures con-tracts and forward contracts through C’s ac-count with D. D must report C’s regulated futures contracts on an annual basis as re-quired by paragraph (c)(5). With respect to C’s forward contracts, D may elect to use the calendar month, quarter, or year as D’s re-porting period as provided in paragraph (c)(6).

(6) Reporting periods and filing groups—(i) Reporting period—(A) In gen-eral. A broker may elect to use the cal-endar month, quarter, or year as the broker’s reporting period. A broker may separately elect a reporting period for each filing group.

(B) Election. For each calendar year, a broker shall elect a reporting period by filing Forms 1096 and 1099 in the manner elected. A different reporting period may be subsequently elected by filing in the manner subsequently elected, provided no duplication of re-ported transactions results.

(ii) Filing group—(A) In general. A broker may elect to group customers or customer accounts by office, branch, department or other method of oper-ational classification and separately file Forms 1096 and 1099 for each filing group.

(B) Election. For each calendar year, a broker shall elect filing groups by fil-ing Forms 1096 and 1099 in the manner elected. Different filing groups may be


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subsequently elected by filing in the manner subsequently elected, provided no duplication of reported transactions results.

(iii) Example. The following example illustrates the rules of this paragraph (c)(6):

Example. The A department of C, a broker, files a separate report for each month of 1984, whereas the B department of C files one re-port for all of 1984. C makes no other reports or returns of information under section 6045 for 1984. C had thereby elected two filing groups for 1984, the A department and the B department. The A department has the cal-endar month as its 1984 reporting period, whereas the B department has the calendar year as its 1984 reporting period. The same result would occur if A and B were offices or branches of C.

(7) Exception for certain sales of agri-cultural commodities and commodity cer-tificates—(i) Agricultural commodities. No return of information is required under section 6045 for a spot or forward sale of an agricultural commodity. This paragraph (c)(7)(i) does not except from reporting sales of agricultural com-modities pursuant to regulated futures contracts, sales of derivative interests in agricultural commodities, or sales described in paragraph (c)(7)(iii) of this section.

(ii) Commodity Credit Corporation cer-tificates. Except as otherwise provided in a revenue ruling or revenue proce-dure, no return of information is re-quired under section 6045 with respect to a sale of a commodity certificate issued by the Commodity Credit Cor-poration under 7 CFR 1470.4 (1990).

(iii) Sales involving designated ware-houses. Paragraph (c)(7)(i) of this sec-tion does not apply to any sale involv-ing a warehouse receipt for an agricul-tural commodity issued by a des-ignated warehouse for an agricultural commodity of the type for which the warehouse is a designated warehouse.

(iv) Definitions. For purposes of this paragraph (c)(7):

(A) Agricultural commodity. An ‘‘agri-cultural commodity’’ includes, but is not limited to, a commodity within the meaning of paragraph (a)(5) of this sec-tion that is a grain, feed, livestock, meat, oil seed, timber, or fiber.

(B) Spot sale. A spot sale is a sale that results in the substantially contem-poraneous delivery of a commodity.

(C) Forward sale. A forward sale is a sale pursuant to a forward contract within the meaning of paragraph (a)(7) of this section.

(D) Designated warehouse. A des-ignated warehouse is a warehouse, de-pository, or other similar entity, des-ignated by a commodity exchange under 7 CFR 1.43 (1992), in which or out of which a particular type of agricul-tural commodity is deliverable in sat-isfaction of a regulated futures con-tract.

(v) Effective dates. Paragraph (c)(7) of this section applies to sales effected on or after January 1, 1993. For sales ef-fected before January 1, 1993, the fol-lowing transactions are excepted from the information reporting require-ments of section 6045:

(A) Spot or forward sales of agricul-tural products or commodities (but not sales of interests in agricultural prod-ucts or commodities, such as sales of regulated futures contracts or forward contracts), effected by any person re-gardless of whether that person takes title to the agricultural products or commodities; and

(B) Sales of negotiable commodity certificates issued by the Commodity Credit Corporation.

(d) Information required—(1) In gen-eral. A broker that is required to make a return of information under para-graph (c) of this section during a re-porting period is required to report for each filing group on a separate Form 1096, ‘‘Annual Summary and Trans-mittal of U.S. Information Returns,’’ or any successor form, the information required by the form in the manner and number of copies required by the form.

(2) Transactional reporting—(i) Re-quired information. Except as provided in paragraph (c)(5) of this section, for each sale for which a broker is required to make a return of information under this section, the broker must report on Form 1099–B, ‘‘Proceeds From Broker and Barter Exchange Transactions,’’ or any successor form the name, address, and taxpayer identification number of the customer, the property sold, the CUSIP number of the security sold (if applicable) or other security identifier number that the Secretary may des-ignate by publication in the FEDERAL REGISTER or in the Internal Revenue


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Bulletin (see § 601.601(d)(2) of this chap-ter), the adjusted basis of the security sold, whether any gain or loss with re-spect to the security sold is long-term or short-term (within the meaning of section 1222), the gross proceeds of the sale, the sale date, and other informa-tion required by the form in the man-ner and number of copies required by the form.

(ii) Specific identification of securities. Except as provided in § 1.1012–1(e)(7)(ii), a broker must report a sale on or after January 1, 2011, of less than the entire position in an account of a specified se-curity that was acquired on different dates or at different prices consistently with a customer’s adequate and timely identification of the security to be sold. See § 1.1012–1(c). If the customer does not provide an adequate and time-ly identification for the sale, the broker must first report the sale of any shares or units in the account for which the broker does not know the ac-quisition or purchase date followed by the earliest shares or units purchased or acquired, whether covered securities or noncovered securities.

(iii) Sales of noncovered securities. A broker is not required to report ad-justed basis and whether any gain or loss on the sale is long-term or short- term for the sale of a noncovered secu-rity if the return identifies the sale as a sale of a noncovered security. A broker that chooses to report this in-formation for a noncovered security is not subject to penalties under section 6721 or 6722 for failure to report this in-formation correctly if the return iden-tifies the sale as a sale of a noncovered security. For purposes of this para-graph (d)(2)(iii), a broker must treat a security for which a broker makes the single-account election described in § 1.1012–1(e)(11)(i) as a covered security.

(iv) Information from other parties and other accounts—(A) Transfer and issuer statements. When reporting a sale of a covered security, a broker must take into account all information, other than the classification of the security (such as stock), furnished on a transfer statement (as described in § 1.6045A–1) and all information furnished or deemed furnished on an issuer state-ment (as described in § 1.6045B–1), un-less the statement is incomplete or the

broker has actual knowledge that it is incorrect. A broker may treat a cus-tomer as a minority shareholder when taking the information on an issuer statement into account unless the broker knows that the customer is a majority shareholder and the issuer statement reports the action’s effect on the basis of majority shareholders. A failure to report correct information that arises solely from reliance on in-formation furnished on a transfer statement or issuer statement is deemed to be due to reasonable cause for purposes of penalties under sections 6721 and 6722. See § 301.6724–1(a)(1) of this chapter.

(B) Other information. A broker is per-mitted, but not required, to take into account information about a covered security other than what is furnished on a transfer statement or issuer state-ment, including any information the broker has about securities held by the same customer in other accounts with the broker. For purposes of penalties under sections 6721 and 6722, a broker that takes into account information received from a customer or third party other than information furnished on a transfer statement or issuer state-ment is deemed to have relied upon this information in good faith if the broker neither knows nor has reason to know that the information is incorrect. See § 301.6724–1(c)(6) of this chapter.

(v) Failure to receive a complete trans-fer statement. A broker that has not re-ceived a complete transfer statement as required under § 1.6045A–1(a)(3) for a transfer of a specified security must re-quest a complete statement from the applicable person effecting the transfer unless, under § 1.6045A–1(a), the trans-feror has no duty to furnish a transfer statement for the transfer. The broker is only required to make this request once. If the broker does not receive a complete transfer statement after re-questing it, the broker may treat the security as a noncovered security upon its subsequent sale or transfer. A trans-fer statement for a covered security is complete if, in the view of the receiv-ing broker, it provides sufficient infor-mation to comply with this section when reporting the sale of the security. A transfer statement for a noncovered


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security is complete if it indicates that the security is a noncovered security.

(vi) Reporting by other parties after a sale—(A) Transfer statements. If a broker receives a transfer statement indi-cating that a security is a covered se-curity after the broker reports the sale of the security, the broker must file a corrected return within thirty days of receiving the statement unless the broker reported the required informa-tion on the original return consistently with the transfer statement.

(B) Issuer statements. If a broker re-ceives or is deemed to receive an issuer statement after the broker reports the sale of a covered security, the broker must file a corrected return within thirty days of receiving the issuer statement unless the broker reported the required information on the origi-nal return consistently with the issuer statement.

(C) Exception. A broker is not re-quired to file a corrected return under this paragraph (d)(2)(vi) if the broker receives the transfer statement or issuer statement more than three years after the broker filed the return.

(vii) Examples. The following exam-ples illustrate the rules of this para-graph (d)(2):

Example 1. (i) On February 22, 2012, K sells 100 shares of stock of C, a corporation, at a loss in an account held with F, a broker. On March 15, 2012, K purchases 100 shares of C stock for cash in an account with G, a dif-ferent broker. Because K acquires the stock purchased on March 15, 2012, for cash in an account after January 1, 2012, under para-graph (a)(15) of this section, the stock is a covered security. K asks G to increase K’s adjusted basis in the stock to account for the application of the wash sale rules under sec-tion 1091 to the loss transaction in the ac-count held with F.

(ii) Under paragraph (d)(2)(iv)(B) of this section, G is not required to take into ac-count the information provided by K when subsequently reporting the adjusted basis and whether any gain or loss on the sale is long-term or short-term. If G chooses to take this information into account, under para-graph (d)(2)(iv)(B) of this section, G is deemed to have relied upon the information received from K in good faith for purposes of penalties under sections 6721 and 6722 if G neither knows nor has reason to know that the information provided by K is incorrect.

Example 2. (i) L purchases shares of stock of a single corporation in an account with F, a broker, on April 17, 1969, April 17, 2012,

April 17, 2013, and April 17, 2014. In January 2015, L sells all the stock.

(ii) Under paragraph (d)(2)(i) of this sec-tion, F must separately report the gross pro-ceeds and adjusted basis attributable to the stock purchased in 2014, for which the gain or loss on the sale is short-term, and the com-bined gross proceeds and adjusted basis at-tributable to the stock purchased in 2012 and 2013, for which the gain or loss on the sale is long-term. Under paragraph (d)(2)(iii) of this section, F must also separately report the gross proceeds attributable to the stock pur-chased in 1969 as the sale of noncovered secu-rities in order to avoid treatment of this sale as the sale of covered securities.

(3) Bond sales between interest payment dates. As to each sale of a debt obliga-tion prior to maturity with respect to which a broker is required to make a return of information under this sec-tion, a broker shall show separately on Form 1099 the amount of accrued and unpaid interest as of the sale date that must be reported by the customer as interest income under § 1.61–7(d) (but not the amount of any original issue or market discount). Such interest infor-mation shall be shown in the manner and at the time required by Form 1099 and section 6049.

(4) Sale date. With respect to sales of property that are reportable under this section, a broker must report a sale as occurring on the date the sale is en-tered on the books of the broker.

(5) Gross proceeds. For purposes of this section, gross proceeds on a sale are the total amount paid to the customer or credited to the customer’s account as a result of the sale reduced by the amount of any interest reported under paragraph (d)(3) of this section and in-creased by any amount not paid or credited by reason of repayment of margin loans. In the case of a closing transaction that results in a loss, gross proceeds are the amount debited from the customer’s account. A broker may, but is not required to, reduce gross pro-ceeds by the amount of commissions and transfer taxes, provided the treat-ment chosen is consistent with the books of the broker. For securities sold pursuant to the exercise of an option granted or acquired before January 1, 2013, a broker may, but is not required to, take the option premiums into ac-count in determining the gross pro-ceeds of the securities sold, provided the treatment chosen is consistent


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with the books of the broker. A broker must report the gross proceeds of iden-tical stock (within the meaning of § 1.1012–1(e)(4)) by averaging the pro-ceeds of each share if the stock is sold at separate times on the same calendar day in executing a single trade order and the broker executing the trade pro-vides a single confirmation to the cus-tomer that reports an aggregate total price or an average price per share. However, a broker may not average the proceeds if the customer notifies the broker in writing of an intent to deter-mine the proceeds of the stock by the actual proceeds per share and the broker receives the notification by January 15 of the calendar year fol-lowing the year of the sale. A broker may extend the January 15 deadline but not beyond the due date for filing the return required under this section.

(6) Adjusted basis—(i) In general. For purposes of this section, the adjusted basis of a security is determined from the initial basis under paragraph (d)(6)(ii) of this section as of the date the security is acquired in an account, increased by the commissions and transfer taxes related to its sale to the extent not accounted for in gross pro-ceeds as described in paragraph (d)(5) of this section. A broker is not required to consider transactions, elections, or events occurring outside the account except for an organizational action taken by an issuer during the period the broker holds custody of the secu-rity (not including the transfer settle-ment date if the security was trans-ferred) reported on an issuer statement (as described in § 1.6045B–1) furnished or deemed furnished to the broker.

(ii) Initial basis—(A) Cost basis. For a security acquired for cash, the initial basis is the total amount of cash paid by the customer or credited against the customer’s account for the security, in-creased by the commissions and trans-fer taxes related to its acquisition. A broker may, but is not required to, take option premiums into account in determining the initial basis of securi-ties purchased or acquired pursuant to the exercise of an option granted or ac-quired before January 1, 2013. A broker may, but is not required to, increase initial basis for income recognized upon the exercise of a compensatory

option or the vesting or exercise of other equity-based compensation ar-rangements, granted or acquired before January 1, 2013. A broker must report the basis of identical stock (within the meaning of § 1.1012–1(e)(4)) by averaging the basis of each share if the stock is purchased at separate times on the same calendar day in executing a sin-gle trade order and the broker exe-cuting the trade provides a single con-firmation to the customer that reports an aggregate total price or an average price per share. However, a broker may not average the basis if the customer timely notifies the broker in writing of an intent to determine the basis of the stock by the actual cost per share in accordance with § 1.1012–1(c)(1)(ii).

(B) Transferred basis—(1) In general. The initial basis of a security trans-ferred to an account is generally the basis reported on the transfer state-ment (as described in § 1.6045A–1).

(2) Securities acquired by gift. If a transfer statement indicates that the security is acquired as a gift, a broker must apply the relevant basis rules for property acquired by gift in deter-mining the initial basis, but is not re-quired to adjust basis for gift tax. A broker must treat the initial basis as equal to the gross proceeds from the sale determined under paragraph (d)(5) of this section if the relevant basis rules for property acquired by gift pre-vent recognizing both gain and loss, or if the relevant basis rules treat the ini-tial basis of the security as its fair market value as of the date of the gift and the broker neither knows nor can readily ascertain this value. If the transfer statement did not report a date for the gift, the broker must treat the settlement date for the transfer as the date of the gift.

(iii) Adjustments for wash sales—(A) In general. A broker must apply the wash sale rules under section 1091 if both the sale and purchase transactions are of covered securities with the same CUSIP number or other security iden-tifier number that the Secretary may designate by publication in the FED-ERAL REGISTER or in the Internal Rev-enue Bulletin (see § 601.601(d)(2) of this chapter). When reporting the sale transaction that triggered the wash sale, the broker must report the


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amount of loss that is disallowed by section 1091 in addition to gross pro-ceeds and adjusted basis. The broker must increase the adjusted basis of the purchased security by the amount of loss disallowed on the sale transaction.

(B) Securities in different accounts. A broker is not required to apply para-graph (d)(6)(iii)(A) of this section if the securities are purchased and sold from different accounts, if the purchased se-curity is transferred to another ac-count before the wash sale, or if the se-curities are treated as held in separate accounts under § 1.1012–1(e). A security is not purchased in an account if it is purchased in another account and transferred into the account.

(C) Effect of election under section 475(f)(1). A broker is not required to apply paragraph (d)(6)(iii)(A) of this section to securities in an account if a customer has in writing both informed the broker that the customer has made a valid and timely election under sec-tion 475(f)(1) and identified the account as solely containing securities subject to the election. For purposes of this paragraph (d)(6)(iii)(C), a writing may be in electronic format. If a customer subsequently informs a broker that the election no longer applies to the cus-tomer or the account, the broker must prospectively apply paragraph (d)(6)(iii)(A) of this section but is not required to apply paragraph (d)(6)(iii)(A) of this section for the pe-riod covered by the customer’s prior in-struction to the broker. A taxpayer that is not a trader in securities within the meaning of section 475(f)(1) does not become a trader in securities, or create an inference that it is a trader in securities, by notifying a broker that it has made a valid and timely election under section 475(f)(1).

(D) Reporting at or near the time of sale. If a wash sale occurs after a broker has completed a return or state-ment reporting a sale of a covered se-curity, the broker must redetermine adjusted basis under this paragraph (d)(6)(iii) and, if the return or state-ment included information incon-sistent with this redetermination, cor-rect the return or statement by the ap-plicable original due date set forth in this section for the return or state-ment.

(iv) Constructive sale and mark-to-mar-ket adjustments. A broker is not re-quired to apply section 1259 (regarding constructive sales), section 475 (regard-ing the mark-to-market method of ac-counting), or section 1296 (regarding the mark-to-market method of ac-counting for marketable stock in a pas-sive foreign investment company) when reporting adjusted basis.

(v) Average basis method adjustments. For a covered security for which basis may be determined by the average basis method, a broker must compute basis using the average basis method if a customer validly elects that method for the securities sold or, in the ab-sence of any instruction from the cus-tomer, if the broker chooses that meth-od as its default basis determination method. See § 1.1012–1(e).

(vi) Regulated investment company and real estate investment trust adjustments. A broker must adjust the basis of a covered security issued by a regulated investment company or real estate in-vestment trust for the effects of undis-tributed capital gains reported to or by the broker under section 852(b)(3)(D) or section 857(b)(3)(D).

(vii) Examples. The following exam-ples, in which all the securities are covered securities, illustrate the rules of this paragraph (d)(6):

Example 1. (i) On September 21, 2012, P pur-chases 100 shares of stock in an account with J, a broker. On December 14, 2012, P pur-chases 100 shares of stock with the same CUSIP number in the same account. On Jan-uary 4, 2013, P sells the 100 shares purchased on September 21, 2012, at a loss.

(ii) Because the sale of stock on January 4, 2013, and the purchase of stock on December 14, 2012, are of covered securities with the same CUSIP number, under paragraph (d)(6)(iii)(A) of this section, J must report the amount of loss disallowed by section 1091 in addition to the gross proceeds of the sale and the adjusted basis of the September 21, 2012, stock.

(iii) P later sells the stock acquired on De-cember 14, 2012. When reporting the sale of the stock, under paragraph (d)(6)(iii)(A) of this section, J must increase the adjusted basis of the stock acquired on December 14, 2012, by the amount of loss disallowed on the January 4, 2013, sale.

Example 2. Assume the same facts as in Ex-ample 1 except that the December 14, 2012, purchase occurs in another account P main-tains with J. Because the December 14, 2012, purchase does not occur in the same account


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as the sale of the September 21, 2012, stock, under paragraph (d)(6)(iii)(B) of this section, J is not required to apply the wash sale rules in reporting the sale of stock acquired on September 21, 2012, or December 14, 2012. Under paragraphs (d)(2)(iii) and (d)(2)(iv)(B) of this section, J may choose to apply the wash sale rules as if the transactions oc-curred in the same account. The result is the same whether P keeps the stock purchased on December 14, 2012, in the other account or transfers the stock into the account from which P sells the stock sold on January 4, 2013.

Example 3. (i) K, a regulated investment company, offers two funds for sale, Fund D and Fund E. On April 22, 2012, Q purchases shares of Fund D and pays a separate load charge. By paying the load charge, Q ac-quires a reinvestment right in shares of Fund E. On April 23, 2012, at the request of Q, Fund D redeems the shares. Q uses the pro-ceeds to purchase shares of Fund E in a sepa-rate account. As a result of the reinvestment right, Q pays no load charge in purchasing the Fund E shares.

(ii) Under paragraph (d)(6)(i) of this sec-tion, when reporting adjusted basis of the Fund D and Fund E shares at the time of their redemption, K is not required to adjust basis for any deferral of the load charge under section 852(f), because the transactions concerning Fund D and Fund E occur in sep-arate accounts. Under paragraph (d)(2)(iv)(B) of this section, K may choose to apply the provisions of section 852(f).

Example 4. R, an employee of C, a corpora-tion, participates in C’s stock option plan. On April 2, 2012, C grants R a nonstatutory option under the plan to buy 100 shares of stock. The option becomes substantially vested on April 2, 2013. On October 2, 2013, R exercises the option and purchases 100 shares. On December 2, 2013, R sells the 100 shares. Under paragraph (d)(6)(ii)(A) of this section, C is required to determine adjusted basis from the amount R pays under the terms of the option. Because C grants the op-tion to R before January 1, 2013, under para-graph (d)(6)(ii)(A) of this section, C is not re-quired to adjust basis for any amount R must include as wage income with respect to the October 2, 2013, stock purchase. The re-sult is the same if C grants R a statutory op-tion.

(7) Long-term or short-term gain or loss—(i) In general. In determining whether any gain or loss on the sale of a security is long-term or short-term within the meaning of section 1222 for purposes of this section, a broker must consider the information reported on a transfer statement (as described in § 1.6045A–1) and apply the relevant rules for property acquired from a decedent

or by gift. A broker is not required to consider transactions, elections, or events occurring outside the account except for an organizational action taken by an issuer during the period the broker holds custody of the secu-rity (not including the transfer settle-ment date if the security was trans-ferred) reported on an issuer statement (as described in § 1.6045B–1) furnished or deemed furnished to the broker.

(ii) Adjustments for wash sales—(A) In general. A broker must apply the wash sale rules under section 1091 if both the sale and purchase transactions are of covered securities with the same CUSIP number or other security iden-tifier number that the Secretary may designate by publication in the FED-ERAL REGISTER or in the Internal Rev-enue Bulletin (see § 601.601(d)(2) of this chapter).

(B) Securities in different accounts. A broker is not required to apply para-graph (d)(7)(ii)(A) of this section if the securities are purchased and sold from different accounts, if the purchased se-curity is transferred to another ac-count before the wash sale, or if the se-curities are treated as held in separate accounts under § 1.1012–1(e). A security is not purchased in an account if it is purchased in another account and transferred into the account.

(C) Effect of election under section 475(f)(1). A broker is not required to apply paragraph (d)(7)(ii)(A) of this sec-tion to securities in an account if a customer has in writing both informed the broker that the customer has made a valid and timely election under sec-tion 475(f)(1) and identified the account as solely containing securities subject to the election. For purposes of this paragraph (d)(7)(ii)(C), a writing may be in electronic format. If a customer subsequently informs a broker that the election no longer applies to the cus-tomer or the account, the broker must prospectively apply paragraph (d)(7)(ii)(A) of this section but is not required to apply paragraph (d)(7)(ii)(A) of this section for the pe-riod covered by the customer’s prior in-struction to the broker. A taxpayer that is not a trader in securities within the meaning of section 475(f)(1) does not become a trader in securities, or create an inference that it is a trader


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in securities, by notifying a broker that it has made a valid and timely election under section 475(f)(1).

(D) Reporting at or near the time of sale. If a wash sale occurs after a broker has completed a return or state-ment reporting a sale of a covered se-curity, the broker must redetermine whether gain or loss on the sale is long-term or short-term under this paragraph (d)(7)(ii) and, if the return or statement included information incon-sistent with this redetermination, cor-rect the return or statement by the ap-plicable original due date set forth in this section for the return or state-ment.

(iii) Constructive sale and mark-to-mar-ket adjustments. A broker is not re-quired to apply section 1259 (regarding constructive sales), section 475 (regard-ing the mark-to-market method of ac-counting), or section 1296 (regarding the mark-to-market method of ac-counting for marketable stock in a pas-sive foreign investment company) when determining whether any gain or loss on the sale of a security is long-term or short-term.

(iv) Regulated investment company and real estate investment trust adjustments. A broker is not required to apply sec-tions 852(b)(4)(A) and 857(b)(8) (regard-ing effect of distributed and undistrib-uted capital gain dividends on a loss on sale of regulated investment company or real estate investment trust shares held six months or less) or section 852(b)(4)(B) (regarding loss disallow-ance on sale of regulated investment company shares held six months or less due to receipt of tax-exempt dividends) when determining whether any gain or loss on the sale of a security is long- term or short-term.

(v) No adjustments for hedging trans-actions or offsetting positions. A broker is not required to apply section 1092 (regarding straddles), section 1233(b)(2) (regarding effect of short sale on hold-ing period of substantially identical property), or § 1.1221–2(b) (regarding hedging transactions) when deter-mining whether any gain or loss on the sale of a security is long-term or short- term.

(8) Conversion into United States dol-lars of amounts paid or received in foreign currency—(i) Conversion rules. (A) When

a payment is made in a foreign cur-rency, a broker must determine the U.S. dollar amount of the payment by converting the foreign currency into U.S. dollars on the date it receives, credits, or makes the payment, as ap-plicable, at the spot rate (as defined in § 1.988–1(d)(1)) or pursuant to a reason-able spot rate convention. When re-porting the sale of a security traded on an established securities market, how-ever, a broker must determine the U.S. dollar amounts at the spot rate or pur-suant to a reasonable spot rate conven-tion as of the settlement date of the purchase or sale, as applicable.

(B) A reasonable spot rate convention includes a month-end spot rate or a monthly average spot rate. A spot rate convention must be used consistently for all non-dollar amounts reported and from year to year. The convention may not be changed without the consent of the Commissioner or his or her dele-gate.

(ii) Effect of identification under § 1.988–5(a), (b), or (c) when the taxpayer effects a sale and a hedge through the same broker. In lieu of the amounts re-portable under paragraph (d)(8)(i) of this section, the gross proceeds and ad-justed basis must each be the inte-grated amount computed under § 1.988– 5(a), (b) or (c) if—

(A) A taxpayer effects through a broker a sale or exchange of nonfunc-tional currency (as defined in § 1.988– 1(c)) and hedges all or a part of the sale as provided in § 1.988–5(a), (b) or (c) with the same broker; and

(B) The taxpayer complies with the requirements of § 1.988–5(a), (b) or (c) and so notifies the broker prior to the end of the calendar year in which the sale occurs.

(iii) Example. The following example illustrates the rules of this paragraph (d)(8):

Example. (i) Z, an individual, is a U.S. cit-izen. On July 4, 2012, Z purchases stock of C, SA, a French corporation traded on an estab-lished securities market, in an account with Q, a broker. Q uses a daily spot rate for con-verting euro and U.S. dollars. Z pays Ö1,200 for the stock. On the settlement date for the purchase, the spot rate is Ö1 = $1.30. On Octo-ber 4, 2012, Z sells the stock for Ö1,000. On the settlement date for the sale, the spot rate is Ö1 = $1.35. On October 5, 2012, Z purchases ad-ditional shares of C, SA, that cause the Ö200


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loss on the stock sold on October 4, 2012, to be disallowed under section 1091.

(ii) Under paragraph (d)(8)(i)(A) of this sec-tion, Q must determine adjusted basis by converting the Ö1,200 paid on behalf of Z into U.S. dollars using the Ö1 = $1.30 spot rate on the settlement date of the purchase. Q must convert the Ö1,000 gross proceeds into U.S. dollars using the Ö1 = $1.35 spot rate on the settlement date for the sale. Thus, Q must report adjusted basis equal to $1,560, gross proceeds equal to $1,350, and $210 in loss dis-allowed by section 1091.

(9) Coordination with the reporting rules for widely held fixed investment trusts under § 1.671–5. Information re-quired to be reported under section 6045(a) for a sale of a security in a widely held fixed investment trust (WHFIT) (as defined under § 1.671–5) and the sale of an interest in a WHFIT must be reported as provided by this section unless the information is also required to be reported under § 1.671–5. To the extent that this section requires additional information under section 6045(g), those requirements are deemed to be met through compliance with the rules in § 1.671–5.

(e) Reporting of barter exchanges—(1) Requirement of reporting. A barter ex-change shall, except as otherwise pro-vided, report in the manner prescribed in this section.

(2) Exchanges required to be reported— (i) In general. Except as provided in paragraphs (e)(2)(ii) and (g) of this sec-tion, a barter exchange must make a return of information for exchanges of personal property or services through the barter exchange during the cal-endar year among its members or cli-ents or between these persons and the barter exchange. For this purpose, property or services are exchanged through a barter exchange if payment for property or services is made by means of a credit on the books of the barter exchange or scrip issued by the barter exchange or if the barter ex-change arranges a direct exchange of property or services among its mem-bers or clients or exchanges property or services with a member or client.

(ii) Exemption. A barter exchange through which there are fewer than 100 exchanges during the calendar year is not required to report for, or make a return of information with respect to exchanges during, such calendar year.

The Commissioner may require mul-tiple barter exchanges to be combined for purposes of the proceeding sentence upon a determination that a material purpose for the formation or continu-ation of one or more of the barter ex-changes to be combined was to receive one or more exemptions pursuant to this subparagraph.

(f) Information required—(1) In general. A person that is a barter exchange dur-ing a calendar year shall report on Form 1096 showing the information re-quired thereon for such year.

(2) Transactional reporting—(i) In gen-eral. As to each exchange for which a barter exchange is required to make a return of information under this sec-tion, the barter exchange must show on Form 1099–B, ‘‘Proceeds From Broker and Barter Exchange Transactions,’’ or any successor form the name, address, and taxpayer identification number of each member or client providing prop-erty or services in the exchange, the property or services provided, the amount received by the member or cli-ent for the property or services, the date on which the exchange occurred, and other information required by the form in the manner and number of cop-ies required by the form.

(ii) Exception for corporate member or client. As to each corporate member or client providing property or services in an exchange for which a return of in-formation is required under this sec-tion, the barter exchange may report the name, address, and taxpayer identi-fication number of the corporate mem-ber or client, the aggregate amount re-ceived by the corporate member or cli-ent during the reporting period for property or services provided by such corporate member or client in ex-change for which a return of informa-tion is required, and such other infor-mation as may be required by Form 1099, in the form, manner, and number of copies required by Form 1099.

(iii) Definition. For purposes of para-graph (f)(2)(ii) of this section, the term ‘‘corporate member or client’’ means a member or client of a barter exchange which is a corporation as defined in section 7701(a)(3) (including an insur-ance company). The term corporation includes a pool, syndicate, partnership,


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or unincorporated association com-posed exclusively of corporations. A barter exchange may treat a member or client as a corporation (and there-fore as a corporate member or client) if such member or client provides an ex-emption certificate as described in § 31.3406(h)–3(a) of this chapter or pro-vided that—

(A) The name of the member or client contains the term ‘‘insurance com-pany,’’ ‘‘indemnity company,’’ ‘‘rein-surance company,’’ or ‘‘assurance com-pany’’;

(B) The name of the member or client contains one of the following unambig-uous expressions of corporate status: Incorporated, Inc., Corporation, Corp., or P.C., but not Company or Co.; or

(C) The member or client is known to the barter exchange to be a corporation through a corporate resolution or simi-lar document on file with the barter exchange clearly indicating corporate status.

(3) Exchange date. For purposes of this section an exchange is considered to occur with respect to a member or client of a barter exchange on the date cash, property, a credit, or scrip is ac-tually or constructively received by the member or client as a result of the exchange. (See § 1.451–2 for rules per-taining to constructive receipt.)

(4) Amount received. The amount re-ceived by a member or client in an ex-change includes cash received, the fair market value of any property or serv-ices received, and the fair market value of any credits to the account of the member or client on the books of the barter exchange or scrip issued to the member or client by the barter ex-change, but does not include any amount received by the member or cli-ent in a subsequent exchange of credits or scrip. For purposes of this section, the fair market value of a credit or scrip is the value assigned to such cred-it or scrip by the issuing barter ex-change for the purpose of exchanges unless the Commissioner requires the use of a different value that the Com-missioner determines more accurately reflects fair market value.

(5) Meaning of terms. For purposes of this paragraph (f)—

(i) A credit is an amount on the books of the barter exchange that is

transferable from one member or client of the barter exchange to another such member or client, or to the barter ex-change in payment for property or services;

(ii) Scrip is a token issued by the bar-ter exchange that is transferable from one member or client, of the barter ex-change to another such member or cli-ent, or to the barter exchange, in pay-ment for property or services; and

(iii) Property does not include a cred-it or scrip.

(6) Reporting period. A barter ex-change shall use the calendar year as the reporting period.

(g) Exempt foreign persons—(1) Brokers. No return of information is required to be made by a broker with respect to a customer who is considered to be an ex-empt foreign person under this para-graph (g)(1). A broker may treat a cus-tomer as an exempt foreign person under the circumstances described in paragraphs (g)(1)(i) through (iii) of this section.

(i) With respect to a sale effected at an office of a broker either inside or outside the United States, the broker may treat the customer as an exempt foreign person if the broker can, prior to the payment, associate the payment with documentation upon which it can rely in order to treat the customer as a foreign beneficial owner in accord-ance with § 1.1441–1(e)(1)(ii), or as made to a foreign payee in accordance with § 1.6049–5(d)(1) or presumed to be made to a foreign payee under § 1.6049–5(d)(2) or (3). For purposes of this paragraph (g)(1)(i), the provisions in § 1.6049–5(c) (regarding rules applicable to docu-mentation of foreign status and defini-tion of U.S. payor, U.S. middleman, non-U.S. payor, and non-U.S. middle-man) shall apply. The provisions of § 1.1441–1 shall apply by substituting the terms broker and customer for the terms withholding agent and payee and without regard for the fact that the provisions apply to amounts subject to withholding under chapter 3 of the In-ternal Revenue Code (Code). The provi-sions of § 1.6049–5(d) shall apply by sub-stituting the terms broker and customer for the terms payor and payee. For pur-poses of this paragraph (g)(1)(i), a broker that is required to obtain, or chooses to obtain, a beneficial owner


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withholding certificate described in § 1.1441–1(e)(2)(i) from an individual may rely on the withholding certificate only to the extent the certificate in-cludes a certification that the bene-ficial owner has not been, and at the time the certificate is furnished, rea-sonably expects not to be present in the United States for a period aggre-gating 183 days or more during each calendar year to which the certificate pertains. The certification is not re-quired if a broker receives documen-tary evidence under § 1.6049–5(c)(1) or (4).

(ii) With respect to a redemption or retirement of stock or an obligation (the interest or original issue discount on, which is described in § 1.6049–5(b) (6), (7), (10), or (11) or the dividends on, which are described in § 1.6042– 3(b)(1)(iv)) that is effected at an office of a broker outside the United States by the issuer (or its paying or transfer agent), the broker may treat the cus-tomer as an exempt foreign person if the broker is not also acting in its ca-pacity as a custodian, nominee, or other agent of the payee.

(iii) With respect to a sale effected by a broker at an office of the broker ei-ther inside or outside the United States, the broker may treat the cus-tomer as an exempt foreign person for the period that those proceeds are as-sets blocked, as described in § 1.1441– 2(e)(3). For purposes of this paragraph (g)(1)(iii) and section 3406, a sale is deemed to occur in accordance with paragraph (d)(4) of this section. The ex-emption in this paragraph (g)(1)(iii) shall terminate when payment of the proceeds is deemed to occur in accord-ance with the provisions of § 1.1441– 2(e)(3).

(2) Barter exchange. No return of in-formation is required by a barter ex-change with respect to a client or a member that the barter exchange may treat as a foreign person pursuant to the procedures described in paragraph (g)(1) of this section.

(3) Applicable rules—(i) Joint owners. Amounts paid to joint owners for which a certificate or documentation is required as a condition for being ex-empt from reporting under paragraph (g) (1)(i) or (2) of this section are pre-sumed made to U.S. payees who are not

exempt recipients if, prior to payment, the broker or barter exchange cannot reliably associate the payment either with a Form W–9 furnished by one of the joint owners in the manner re-quired in §§ 31.3406(d)–1 through 31.3406(d)–5 of this chapter, or with doc-umentation described in paragraph (g)(1)(i) of this section furnished by each joint owner upon which it can rely to treat each joint owner as a for-eign payee or foreign beneficial owner. For purposes of applying this para-graph (g)(3)(i), the grace period de-scribed in § 1.6049–5(d)(2)(ii) shall apply only if each payee qualifies for such grace period.

(ii) Special rules for determining who the customer is. For purposes of this paragraph (g), the determination of who the customer is shall be made on the basis of the provisions in § 1.6049– 5(d) by substituting in that section the terms payor and payee with the terms broker and customer.

(iii) Place of effecting sale—(A) Sale outside the United States. For purposes of this paragraph (g), a sale is consid-ered to be effected by a broker at an of-fice outside the United States if, in ac-cordance with instructions directly transmitted to such office from outside the United States by the broker’s cus-tomer, the office completes the acts necessary to effect the sale outside the United States. The acts necessary to effect the sale may be considered to have been completed outside the United States without regard to wheth-er—

(1) Pursuant to instructions from an office of the broker outside the United States, an office of the same broker within the United States undertakes one or more steps of the sale in the United States; or

(2) The gross proceeds of the sale are paid by a draft drawn on a United States bank account or by a wire or other electronic transfer from a United States account.

(B) Sale inside the United States. For purposes of this paragraph (g), a sale that is considered to be effected by a broker at an office outside the United States under paragraph (g)(3)(iii)(A) of this section shall nevertheless be con-sidered to be effected by a broker at an


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office inside the United States if ei-ther—

(1) The customer has opened an ac-count with a United States office of that broker;

(2) The customer has transmitted in-structions concerning this and other sales to the foreign office of the broker from within the United States by mail, telephone, electronic transmission or otherwise (unless the transmissions from the United States have taken place in isolated and infrequent cir-cumstances);

(3) The gross proceeds of the sale are paid to the customer by a transfer of funds into an account (other than an international account as defined in § 1.6049–5(e)(4)) maintained by the cus-tomer in the United States or mailed to the customer at an address in the United States;

(4) The confirmation of the sale is mailed to a customer at an address in the United States; or

(5) An office of the same broker with-in the United States negotiates the sale with the customer or receives in-structions with respect to the sale from the customer.

(iv) Special rules where the customer is a foreign intermediary or certain U.S. branches. A foreign intermediary, as de-fined in § 1.1441–1(c)(13), is an exempt foreign person, except when the broker has actual knowledge (within the meaning of § 1.6049–5(c)(3)) that the per-son for whom the intermediary acts is a U.S. person that is not exempt from reporting under paragraph (c)(3) of this section or the broker is required to pre-sume under § 1.6049–5(d)(3) that the payee is a U.S. person that is not an ex-empt recipient. If an intermediary, as defined in § 1.1441–1(c)(13), or a U.S. branch described in § 1.1441–1(b)(2)(iv) (other than a U.S. branch that is treat-ed as a U.S. person) receives a payment from a payor or middleman, which pay-ment the payor or middleman can asso-ciate with a valid withholding certifi-cate described in § 1.1441–1(e)(3)(ii), (iii), or (v) furnished by such intermediary or U.S. branch, then the intermediary or U.S. branch is not required to report such payment when it, in turn, pays the amount to the person whose name is on the certificate furnished by the intermediary or U.S. branch to the

payor or middleman, unless, and to the extent, the intermediary or U.S. branch knows that the payment is re-quired to be reported under this section and was not so reported. For example, if a foreign intermediary or U.S. branch fails to provide information re-garding U.S. persons that are not ex-empt from reporting under paragraph (c)(3) of this section to the person from whom the intermediary or U.S. branch receives the payment, the foreign intermediary or U.S. branch must re-port the payment on an information re-turn. The exception of this paragraph (g)(3)(iv) shall not apply to a qualified intermediary that assumes reporting responsibility under chapter 61 of the Internal Revenue Code.

(4) Examples. The application of the provisions of this paragraph (g) may be illustrated by the following examples:

Example 1. FC is a foreign corporation that is not a U.S. payor or U.S. middleman de-scribed in § 1.6049–5(c)(5) that regularly issues and retires its own debt obligations. A is an individual whose residence address is inside the United States, who holds a bond issued by FC that is in registered form (within the meaning of section 163(f) and the regulations under that section). The bond is retired by FP, a foreign corporation that is a broker within the meaning of paragraph (a)(1) of this section and the designated paying agent of FC. FP mails the proceeds to A at A’s U.S. address. The sale would be considered to be effected at an office outside the United States under paragraph (g)(3)(iii)(A) of this section except that the proceeds of the sale are mailed to a U.S. address. For that rea-son, the sale is considered to be effected at an office of the broker inside the United States under paragraph (g)(3)(iii)(B) of this section. Therefore, FC is a broker under paragraph (a)(1) of this section with respect to this transaction because, although it is not a U.S. payor or U.S. middleman, as de-scribed in § 1.6049–5(c)(5), it is deemed to ef-fect the sale in the United States. FP is a broker for the same reasons. However, under the multiple broker exception under para-graph (c)(3)(iii) of this section, FP, rather than FC, is required to report the payment because FP is responsible for paying the holder the proceeds from the retired obliga-tions. Under paragraph (g)(1)(i) of this sec-tion, FP may not treat A as an exempt for-eign person and must make an information return under section 6045 with respect to the retirement of the FC bond, unless FP obtains the certificate or documentation described in paragraph (g)(1)(i) of this section.


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Example 2. The facts are the same as in Ex-ample 1 except that FP mails the proceeds to A at an address outside the United States. Under paragraph (g)(3)(iii)(A) of this section, the sale is considered to be effected at an of-fice of the broker outside the United States. Therefore, under paragraph (a)(1) of this sec-tion, neither FC nor FP is a broker with re-spect to the retirement of the FC bond. Ac-cordingly, neither is required to make an in-formation return under section 6045.

Example 3. The facts are the same as in Ex-ample 2 except that FP is also the agent of A. The result is the same as in Example 2. Nei-ther FP nor FC are brokers under paragraph (a)(1) of this section with respect to the sale since the sale is effected outside the United States and neither of them are U.S. payors (within the meaning of § 1.6049–5(c)(5)).

Example 4. The facts are the same as in Ex-ample 1 except that the registered bond held by A was issued by DC, a domestic corpora-tion that regularly issues and retires its own debt obligations. Also, FP mails the proceeds to A at an address outside the United States. Interest on the bond is not described in para-graph (g)(1)(ii) of this section. The sale is considered to be effected at an office outside the United States under paragraph (g)(3)(iii)(A) of this section. DC is a broker under paragraph (a)(1)(i)(B) of this section. DC is not required to report the payment under the multiple broker exception under paragraph (c)(3)(iii) of this section. FP is not required to make an information return under section 6045 because FP is not a U.S. payor described in § 1.6049–5(c)(5) and the sale is effected outside the United States. Ac-cordingly, FP is not a broker under para-graph (a)(1) of this section.

Example 5. The facts are the same as in Ex-ample 4 except that FP is also the agent of A. DC is a broker under paragraph (a)(1) of this section. DC is not required to report under the multiple broker exception under para-graph (c)(3)(iii) of this section. FP is not re-quired to make an information return under section 6045 because FP is not a U.S. payor described in § 1.6049–5(c)(5) and the sale is ef-fected outside the United States and there-fore FP is not a broker under paragraph (a)(1) of this section.

Example 6. The facts are the same as in Ex-ample 4 except that the bond is retired by DP, a broker within the meaning of para-graph (a)(1) of this section and the des-ignated paying agent of DC. DP is a U.S. payor under § 1.6049–5(c)(5). DC is not re-quired to report under the multiple broker exception under paragraph (c)(3)(iii) of this section. DP is required to make an informa-tion return under section 6045 because it is the person responsible for paying the pro-ceeds from the retired obligations unless DP obtains the certificate or documentary evi-dence described in paragraph (g)(1)(i) of this section.

Example 7. Customer A, an individual, owns U.S. corporate bonds issued in registered form after July 18, 1984 and carrying a stated rate of interest. The bonds are held through an account with foreign bank, X, and are held in street name. X is a wholly-owned subsidiary of a U.S. company and is not a qualified intermediary within the meaning of § 1.1441–1(e)(5)(ii). X has no documentation regarding A. A instructs X to sell the bonds. In order to effect the sale, X acts through its agent in the United States, Y. Y sells the bonds and remits the sales proceeds to X. X credits A’s account in the foreign country. X does not provide documentation to Y.

(i) Y’s obligations to withhold and report. Y treats X as the customer, and not A, because Y cannot treat X as an intermediary because it has received no documentation from X. Y is not required to report the sales proceeds under the multiple broker exception under paragraph (c)(3)(iii) of this section, because X is an exempt recipient. Further, Y is not required to report the amount of accrued in-terest paid to X on Form 1042–S under § 1.1461–1(c)(2)(ii) because accrued interest is not an amount subject to reporting unless the withholding agent knows that the obli-gation is being sold with a primary purpose of avoiding tax.

(ii) X’s obligations to withhold and report. Although X has effected, within the meaning of paragraph (a)(1) of this section, the sale of a security at an office outside the United States under paragraph (g)(3)(iii) of this sec-tion, X is treated as a broker, under para-graph (a)(1) of this section, because as a wholly-owned subsidiary of a U.S. corpora-tion, X is a U.S. payor. See § 1.6049–5(c)(5). Under the presumptions described in § 1.6049– 5(d)(2), X must presume that, with respect to the sales proceeds, A is a U.S. person who is not an exempt recipient. Therefore the pay-ment of sales proceeds to A by X is report-able on a Form 1099 under paragraph (c)(2) of this section. X has no obligation to backup withhold on the payment based on the ex-emption under § 31.3406(g)–1(e) of this chap-ter, unless X has actual knowledge that A is a U.S. person that is not an exempt recipi-ent. X is also required to separately report the accrued interest (see paragraph (d)(3) of this section) on Form 1099 under section 6049 because A is also presumed to be a U.S. per-son who is not an exempt recipient under the presumption rule in § 1.6049–5(d)(2) and § 1.1441–1(b)(3)(iii) since accrued interest is not an amount subject to reporting and therefore the presumption of foreign status for offshore accounts under § 1.1441– 1(b)(3)(iii)(D) does not apply.

Example 8. The facts are the same as in Ex-ample 7, except that instead of U.S. corporate bonds that carry stated interest, A owns original issue discount instruments de-scribed in section 871(g)(1)(B)(i) (i.e., obliga-tions payable 183 days or less from the date


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of original issue). In addition, the sale is in a transaction other than a redemption.

(i) Y’s obligations to withhold and report. Y is not required to report the sales proceeds under the multiple broker exception under paragraph (c)(3)(iii) of this section, because X is an exempt recipient.

(ii) X’s obligations to withhold and report. Although X has effected, within the meaning of paragraph (a)(1) of this section, the sale of a security at an office outside the United States under paragraph (g)(3)(iii) of this sec-tion, X is treated as a broker, under para-graph (a)(1) of this section, because as a wholly-owned subsidiary of a U.S. corpora-tion, X is a U.S. payor. See § 1.6049–5(c)(5). Under the presumptions described in § 1.6049– 5(d)(2), X must presume that, with respect to the sales proceeds, A is a U.S. person who is not an exempt recipient. Therefore the pay-ment of sales proceeds to A by X is report-able on a Form 1099 under paragraph (c)(2) of this section. X has no obligation to backup withhold on the payment based on the ex-emption under § 31.3406(g)–1(e) of this chap-ter, unless X has actual knowledge that A is a U.S. person that is not an exempt recipi-ent. X is not required to separately report the amount of accrued original issue dis-count. See paragraph (d)(3) of this section.

Example 9. The facts are the same as in Ex-ample 8, except that X is a foreign corpora-tion that is not a U.S. payor under § 1.6049– 5(c).

(i) Y’s obligations to withhold and report. Y is not required to report the sales proceeds under the multiple broker exception under paragraph (c)(3)(iii) of this section, because X is the person responsible for paying the proceeds from the sale to A.

(ii) X’s obligations to withhold and report. Although A is presumed to be a U.S. payee under the presumptions of § 1.6049–5(d)(2), X is not considered to be a broker under para-graph (a)(1) of this section because it is a not a U.S. payor under § 1.6049–5(c)(5). Therefore X is not required to report the sale under paragraph (c)(2) of this section.

(5) Effective date—(i) General rule. The provisions of this paragraph (g) apply to payments made after December 31, 2000.

(ii) Transition rules. The validity of a withholding certificate (namely, Form W–8 or other form upon which the payor is permitted to rely to hold the payee as a foreign person) that was valid on January 1, 1998, under the reg-ulations in effect prior to January 1, 2001 (see 26 CFR parts 1 and 35a, revised April 1, 1999) and expired, or will ex-pire, at any time during 1998, is ex-tended until December 31, 1998. The va-lidity of a withholding certificate that

is valid on or after January 1, 1999, re-mains valid until its validity expires under the regulations in effect prior to January 1, 2001 (see 26 CFR parts 1 and 35a, revised April 1, 1999) but in no event shall such a withholding certifi-cate remain valid after December 31, 2000. The rule in this paragraph (g)(5)(ii), however, does not apply to ex-tend the validity period of a form that expires in 1998 solely by reason of changes in the circumstances of the person whose name is on the certifi-cate. Notwithstanding the first three sentences of this paragraph (g)(5)(ii), a payor may choose not to take advan-tage of the transition rule in this para-graph (g)(5)(ii) with respect to one or more withholding certificates valid under the regulations in effect prior to January 1, 2001 (see 26 CFR parts 1 and 35a, revised April 1, 1999) and, there-fore, to require withholding certifi-cates conforming to the requirements described in this section (new with-holding certificates). For purposes of this section, a new withholding certifi-cate is deemed to satisfy the docu-mentation requirement under the regu-lations in effect prior to January 1, 2001 (see 26 CFR parts 1 and 35a, revised April 1, 1999). Further, a new with-holding certificate remains valid for the period specified in § 1.1441– 1(e)(4)(ii), regardless of when the cer-tificate is obtained.

(h) Identity of customer—(1) In general. For purposes of this section, a broker or barter exchange shall treat the per-son who appears on the books and records of the broker or barter ex-change with respect to property or services as the principals with respect thereto.

(2) Examples. The following examples illustrate the rule of this paragraph (h):

Example 1. The records of A, a broker, show an account in the name of ‘‘B’’. B is a nomi-nee for C. All reporting with respect to such account shall treat B as the customer.

Example 2. J, an individual, places an order with H, a broker, to sell J’s stock that is held by P, a broker/dealer, in an account for J with P designated as nominee for J, and to credit the gross proceeds from the sale to J’s account with P. The account is in the name of P, so that H’s customer is P.

(i) [Reserved]


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(j) Time and place for filing; cross-ref-erence to penalty. Forms 1096 and 1099 required under this section shall be filed after the last calendar day of the reporting period elected by the broker or barter exchange and on or before February 28 of the following calendar year with the appropriate Internal Revenue Service Center, the address of which is listed in the instructions for Form 1096. See paragraph (l) of this section for the requirement to file cer-tain returns on magnetic media. For provisions relating to the penalty pro-vided for the failure to file timely a correct information return under sec-tion 6045(a), see § 301.6721–1 of this chap-ter. See § 301.6724–1 of this chapter for the waiver of a penalty if the failure is due to reasonable cause and is not due to willful neglect.

(k) Requirement and time for furnishing statement; cross-reference to penalty—(1) General requirements. A broker or barter exchange making a return of informa-tion under this section must furnish to the person whose identifying number is (or is required to be) shown on the re-turn a written statement showing the information required by paragraph (c)(5), (d), or (f) of this section and con-taining a legend stating that the infor-mation is being reported to the Inter-nal Revenue Service. If the return of information is not made on magnetic media, this requirement may be satis-fied by furnishing to the person a copy of all Forms 1099 or any successor form for the person filed with the Internal Revenue Service Center. A statement is considered to be furnished to a per-son to whom a statement is required to be made under this paragraph (k) if it is mailed to the person at the last ad-dress of the person known to the broker or barter exchange.

(2) Time for furnishing statements. A broker or barter exchange may furnish the statements required under this paragraph (k) yearly, quarterly, monthly, or on any other basis, with-out regard to the reporting period the broker or barter exchange elects; how-ever, all statements required to be fur-nished under this paragraph (k) for a calendar year must be furnished on or before February 15 of the following cal-endar year.

(3) Consolidated reporting. (i) The term consolidated reporting statement means a grouping of statements the same broker or barter exchange furnishes to the same customer or group of cus-tomers on the same date for the same reporting year that includes a state-ment required under this section. A consolidated reporting statement is limited to statements based on the same relationship of broker or barter exchange to customer as the statement required to be furnished under this sec-tion. For purposes of this paragraph (k)(3)(i), a broker may treat a share-holder of a broker as a customer of the broker and may treat a grouping of statements for a customer as including a statement required to be furnished under this section if the customer has an account with the broker for which a statement would be required to be fur-nished under this section if the cus-tomer purchased and sold stock in a corporation in the account during the year.

(ii) A consolidated reporting state-ment must be furnished on or before February 15 of the year following the calendar year reported. Any statement that otherwise must be furnished on or before January 31 must be furnished on or before February 15 if it is furnished in the consolidated reporting state-ment.

(iii) Examples. The following exam-ples illustrate the rules of this para-graph (k)(3):

Example 1. D has a taxable account with B, a broker, consisting solely of stock in a sin-gle corporation. In 2010, D receives report-able dividends from this stock and sells the stock. Under this section and § 1.6042–4, B must furnish a Form 1099–B, ‘‘Proceeds From Broker and Barter Exchange Transactions,’’ and Form 1099–DIV, ‘‘Dividends and Distribu-tions,’’ to D in 2011 for the sale and the divi-dends. Under paragraph (k)(2) of this section, B is required to furnish the required state-ment under this section to D by February 15, 2011. B must furnish the statement reporting the dividends by the January 31, 2011, due date provided in § 1.6042–4. However, under paragraph (k)(3)(ii) of this section, B must furnish the statement reporting the divi-dends by February 15, 2011, if furnished in a consolidated reporting statement as defined in paragraph (k)(3)(i) of this section.

Example 2. Assume the same facts as in Ex-ample 1 except that D has invested solely in


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a money market fund for which sales are ex-cepted from the reporting required under this section. B therefore is not required to issue a statement under this section if D sells an interest in the money market fund. Under paragraph (k)(3)(i) of this section, B may treat a grouping of statements for D as including a required statement under this section because D has an account for which a statement would be required under this section if D purchased and sold stock in a corporation in the account during the year. Therefore, under paragraph (k)(3)(ii) of this section, B must furnish the statement re-porting the dividends by February 15, 2011.

Example 3. E has a nontaxable IRA account with B, a broker. This account is the only ac-count E holds with B. E sells stock in 2010 in this account. E also receives a cash distribu-tion from the account in 2010. The cash dis-tribution from the IRA is reportable on Form 1099–R, ‘‘Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.,’’ under § 1.408–7. Because the account is not taxable, sales in the account are not subject to reporting under this section. Therefore, because no statement is required under this section, under paragraph (k)(3) of this sec-tion, B may not furnish any statements to E in a consolidated reporting statement. B must furnish the Form 1099–R by the date re-quired under § 1.408–7.

Example 4. Assume the same facts as in Ex-ample 3 except that E and F have a joint tax-able account with B. Because sales in the joint taxable account are subject to report-ing under this section, under paragraph (k)(3) of this section, B must furnish by Feb-ruary 15, 2011, all customer statements for 2010 that B otherwise must furnish jointly to E and F on or before January 31, 2011, if fur-nished on the same date in a consolidated re-porting statement with the required state-ments under this section for any sales in the joint taxable account. However, B may not include any statement for E’s IRA account in the consolidated reporting statement fur-nished jointly to E and F because the state-ments are not furnished to the same cus-tomer or group of customers.

(4) Cross-reference to penalty. For pro-visions for failure to furnish timely a correct payee statement, see § 301.6724– 1 of this chapter (Procedure and Ad-ministration Regulations). See § 301.6724–1 of this chapter for the waiv-er of a penalty if the failure is due to reasonable cause and is not due to will-ful neglect.

(l) Use of magnetic media. For infor-mation returns filed after December 31, 1996, see § 301.6011–2 of this chapter for rules relating to filing information re-turns on magnetic media and for rules

relating to waivers granted for undue hardship. A broker or barter exchange that fails to file a Form 1099 on mag-netic media, when required, may be subject to a penalty under section 6721 for each such failure. See paragraph (j) of this section.

(m) Reporting on options transactions. [Reserved]

(n) Reporting on bond discounts. [Re-served]

(o) Additional reporting by stock trans-fer agents. [Reserved]

(p) Electronic filing. Notwithstanding the time prescribed for filing in para-graph (j) of this section, Forms 1096 and 1099 required under this section for reporting periods ending during a cal-endar year shall, if filed electronically, be filed after the last calendar day of the reporting period elected by the broker or barter exchange and on or be-fore March 31 of the following calendar year.

[T.D. 7873, 48 FR 10304, Mar. 11, 1983]

EDITORIAL NOTE: For FEDERAL REGISTER ci-tations affecting § 1.6045–1, see the List of CFR Sections Affected, which appears in the Finding Aids section of the printed volume and at www.fdsys.gov.

§ 1.6045–1T Returns of information of brokers and barter exchanges (tem-porary).

(a)–(k) [Reserved] For further guidance, see § 1.6045–1 (a)

through (k). (l) Use of magnetic media. For infor-

mation returns filed after December 31, 1996, see § 301.6011–2T of this chapter for rules relating to filing information re-turns on magnetic media and for rules relating to waivers granted for undue hardship. For information returns filed prior to January 1, 1997, see § 1.6045–1(l)

[T.D. 8683, 61 FR 53060, Oct. 10, 1996]

§ 1.6045–2 Furnishing statement re-quired with respect to certain sub-stitute payments.

(a) Requirement of furnishing state-ments—(1) In general. Any broker (as de-fined in paragraph (a)(4)(ii) of this sec-tion) that transfers securities (as de-fined in § 1.6045–1(a)(3)) of a customer (as defined in paragraph (a)(4)(iii) of this section) for use in a short sale and receives on behalf of the customer a


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